Chancery considers US “initial interest confusion” import

Thanks to a scrap between two financial services businesses over who was entitled to use the brand “OCH”, a concept hitherto applied only by the US courts has now arrived in Chancery. Stephen Groom reports on what may turn out to be a historic judgment dealing with advertising and trade mark rights.

Arnold J handed down judgment in Chancery in a financial services sector scrap over entitlement to use the unlikely brand OCH.

The claimants ("Och-Ziff") were companies in the Och (pronounced "ock") -Ziff global asset management group, founded in 1994 by a Mr. Och, a well known and successful fund manager. They owned Community Trade Marks OCH and OCH-ZIFF, registered in classes 9,16 and 36. The class 36 services covered a wide range of financial services including the types of services offered by the Defendants.

The defendants ("OCH") included OCH Capital LLP (apparently pronounced "oh-see-aich"), set up in 2009 to manage investment business, and its CEO Thomas Ochoki (pronounced "o-hot-ski").

Och-Ziff found out about OCH in 2009 and having obtained no satisfaction in correspondence with them, sued OCH for trade mark infringement and passing off.

The evidence showed that OCH used the OCH brand in various guises including OCH and OCH CAPITAL, but the Defendants' only use of OCH on its own was in internal emails.

Clearly the usage was of an identical mark to the OCH mark registered by the claimants, having been applied for just 8 days after Och-Ziff sent their first letter before action to OCH. It was also being used in respect of identical services to those for which Och-Ziff's OCH mark was registered.

On the face of it Och-Ziff's case in trade mark infringement looked open and shut, but OCH defended on two grounds.

"Bad faith" defence

First OCH argued that by filing the application to register OCH after they were aware of the Defendants' use of the brand, Och-Ziff were in bad faith and should be stripped of the registration.

Arnold J dealt with this in short order, holding that it was perfectly legitimate for Och-Ziff to file the application for OCH in order to bolster their position before proceedings were issued. So no bad faith and the registration was valid.

Were internal emails "use in the course of trade"?

OCH's next defence was that internal email use of a brand could not infringe a registered trade mark because it was not "use in the course of trade" as in

"A community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

(a) any sign which is identical with the [CTM] in relation to goods or services which are identical with those for which the [CTM] is registered."

(Article 9.1 (a) of Community Trade Mark Regulation 207/2009/EC):

After citing various authorities Arnold J held that purely internal use of a trade mark was not "use in the course of trade", so this claim failed.

Were OCH and OCH CAPITAL identical marks?

Och-Ziff were still not done with Article 9 .1 (a). There was the brand OCH CAPITAL which OCH had used as well. And here the use was more extensive than in internal emails, including on the business's website and in brochures.

So here Och-Zif argued that here there was clear use in the course of trade and because OCH was included in full within the OCH CAPITAL brand, the Defendants were using the identical sign OCH as registered by Och-Ziff and were therefore liable under 9.1 (a).

"Not so" held Arnold J because the word CAPITAL was not so insignificant that it would go unnoticed by the relevant average consumer. Accordingly there was no use here of a sign that was identical to OCH and therefore no liability under 9.1 (a).

"Initial interest confusion" comes into play

So Och-Ziff were thrown onto Article 9.1. (b) of the Trade Mark Regulation. This applies where a Defendant uses a mark that is similar to the registered mark. Here the Claimant must establish that there is a likelihood of confusion on the part of the public in order to succeed in a claim of trade mark infringement.

Och-Ziff argued that the type of confusion caught by 9.1 (b) included "initial interest confusion." This was key in this case as there was evidence of instances of confusion but in all case this had been allayed quite quickly. For instance a client of Mr Och had seen OCH CAPITAL in the window of OCH's offices in the City and called Mr Och to remark on his new City offices, but Mr Och swiftly disabused him.

The concept of initial interest confusion comes from the US and

"allows for the finding of liability where a plaintiff can demonstrate that a consumer was confused by a defendant's conduct at the time of interest in a product or service [for instance by use of confusing branding in advertising], even if that initial confusion is corrected by the time of purchase."

OCH argued against the US approach, submitting that in these circumstances there could be no actionable confusion because it would have been dispelled before any contract for the provision of OCH's services were signed by a new client.

Arnold J did not agree. He cited ECJ and UK authority for the proposition that even if early confusion were eliminated before a sale, there were at least two ways in which a trade mark proprietor could still be damaged.

Two ways in which damage can be done

Firstly confusion might affect the reputation of the trade marked goods or services and for these purposes it was irrelevant whether the Defendant's products are objectively inferior.

Secondly the confusion may erode the distinctiveness of the registered mark.

This approach is supported by the judgment of the ECJ in the Portakabin case (C558/08 Portakabin v Primakabin) as follows:

"in the case where a third party's ad suggests that there is an economic link [with] the proprietor of the trade mark the conclusion must be that there is an adverse effect on the function of indicating origin. Similarly in the case where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis a vis the proprietor of the trade mark…the conclusion must be that there is an adverse effect on that function of the trade mark."

Based on this, Arnold J held that there was material confusion and held for Och-Ziff on Article 9.1 (b), finding OCH liable for infringement of the OCH trade mark by use of the OCH CAPITAL brand on its website and on a brochure. He also held that this type of confusion was sufficient to give Och-Ziff a good case in passing off.

Why this matters:

This is the first time that the US concept of initial interest confusion has been subjected to scrutiny in the English High Court.

Arnold J's finding emphasises that where confusion is a key element in a dispute over use of similar brands, whether in the context of passing off or Article 9.1 (b), a defendant will be taking a considerable risk if it relies on an argument that any initial confusion, brought about for instance by advertising, can be disregarded if the customer knows the correct position before any sale is made.

The finding on the "bad faith" issue also emphasises that it may not be too late to apply to register that mark, even though you may be aware of others using similar brands.